Central America and the Caribbean will invest $3.3bn in smart grid infrastructure over the period 2015-2025. This investment will help lower the regions high cost of electricity by incorporating renewable resources and reducing rampant electricity theft. At 19.8 cents per kWh, the average residential tariff in Central America and the Caribbean is more than double the average across emerging market countries, according to a new study published today by Northeast Group, LLC.

The Central America and Caribbean region is endowed with a wealth of untapped renewable energy resources. Smart grid infrastructure investment is critical to incorporating solar, wind and other renewables into the existing grid, said Ben Gardner, president of Northeast Group. Additionally, the regions transmission and distribution losses average nearly 20%, largely due to rampant electricity theft. This is among the worst rates in the world, behind only Africa and South Asia. Incorporating more renewable generation capacity and reducing losses can help bring down the regions high electricity prices.

The largest investments in the near-term will be in the Dominican Republic, Jamaica and Costa Rica. In addition, the regions larger markets of Guatemala and Honduras will also see significant investment over the forecast period. The region benefits from shared standards with the US and proximity to several experienced North American smart grid vendors.

At the same time, the region must overcome several barriers to smart grid investment. Chief among these is a crime and violence problem that is among the worst in the world. Security challenges will likely put pressure on power infrastructure progress in the region.